Film business sprang back to life in Cannes this year, with nary a peep from the usual “sky is falling” fearmongers. After two years of virtual markets, dealmakers were thrilled that premiering films could be watched together with international audiences, meetings could be done in person with near-full film slates and projects could be negotiated across territories with support from a multitude of producers. As UTA Independent Film Group’s John McGrath said on a panel at the American Pavilion, festivals and in-person marketplaces create the kind of urgency that drives deals and business. Indeed, there hasn’t been such an abundance of deals at one time since the pre-pandemic days, with streamers Netflix, MUBI and Apple TV+ making splashy buys out of the festival and market both, while distributors A24, NEON, Utopia, IFC, Sony Pictures Classics and Janus Films, among others, all bought festival titles that will head to theatrical screens. 

But while the industry was in high spirits, agents, distributors, exhibitors and filmmakers are all working through remaining pandemic-related challenges. Visit Films’s head Ryan Kampe says, “In general, business is trying to come back, but I don’t think it’s on solid footing yet.” Chris Tuffin, managing director of foreign sales at production company Sentient Pictures International, elaborates: “With bigger films, there’s a concern about which ones will actually be able to make their sales/finance budget, either due to overly ambitious pricing or being flipped [before completion] to a streamer. Smaller films are fighting for the few dollars left over.”

From sales pricing and deal-making to production budgeting and distribution slates, misalignments remain across the industry. As the fall markets and awards season approach, here are some of the discussions I found the industry weighing in on. 

The Conundrum of Higher Production Budgets and Sales Prices

It’s common knowledge that production budgets have increased for both scripted and unscripted content due to continued COVID protocols and hefty insurance costs coupled with inflation and skyrocketing talent fees. The question is, how do producers and financiers recoup higher production budgets when cash-strapped distributors are not able to pay more? 

“Costs are going up, yet buyers are paying less, so you get downward pressure on your budgets from distributors and financiers,” says Canadian producer Dan Bekerman, whose credits include The Witch and Viggo Mortensen’s directorial debut Falling. “It can be stressful.” He sees these factors driving more North American independent production overseas, where soft money and insurance support are more readily available. British producer Michael Ryan, partner at production, financing and distribution sales company GFM Animation and chairman of Independent Film & Television Alliance, also spoke at Cannes, saying independent producers have no choice but to budget for less: his budgets, he says, are now roughly 20 to 25 percent lower than before the pandemic.

With increased budgets comes increased cast lines. Matthew Helderman of production and finance outfit BondIt Media Capital says, “Streamers have definitely impacted this as they will overpay talent, which leads to a trickle-down effect where agents and managers will hold off on their clients joining indie projects as a streamer opportunity could be 10 times higher the rate. This makes it much harder for independent films to get off the ground.” 

Regarding the pricing of completed films, distributors have different points of view depending on the territory. Kino Lorber’s senior vice president of theatrical/nontheatrical distribution and acquisitions, Wendy Lidell, tells me she noted that asking prices from sales agents for independent specialty and foreign language films remained largely steady, or even went down, because “sales agents understand the older arthouse audience has not returned to theaters in pre-pandemic numbers.” Robert Aaronson, senior vice president of Cohen Media Group, concurs, saying he also did not see a great difference in prices except for the more exclusive festival premieres. But sales agents’ slates are overstuffed: “There is plenty of product to go around,” he says.

One smaller UK distributor described higher prices tied to the strong dollar, while others say that the loss of markets in China (due to increased censorship and continued COVID challenges) and Russia (despite rumors swirling that Russians are still buying, discreetly, from willing sales agents) have elevated asking prices. Another mid-size UK sales agent tells me they have had issues with certain territories struggling to meet price demands because of COVID-related issues but, given the last two years, are not in a position to lower their asking price. As Tuffin summarizes, buyers seldom take into account production challenges like COVID, just like sales agents fail to take into account how distributors have managed to survive two years with no one in theaters: “We tend to listen only when we are forced to. That’s one of capitalism’s inherent problems.”

Equity Financing

The state of the equity finance markets was also disputed. At Winston Baker’s Film Finance Forum in Cannes, Rob Reiner spoke about his relaunch of Castle Rock Pictures with a $175 million fund from banks and blue chip investors, including one of the co-founders of the Moderna vaccine. (The company’s new slate launches with Reiner’s sequel to Spinal Tap, the original of which played on the beach during the festival.) In the same session, another speaker cited the role of private equity in large deals, such as the $900 million sale of Reese Witherspoon’s Hello Sunshine production company to a new media venture backed by private equity firm Blackstone. But for smaller deals and individual pictures, producers speaking at the American Pavilion said equity financing is currently very tough. “Equity, equity, equity—it’s a huge challenge,” said lawyer and producer Harris Tulchin. “There are wonderful places you can find subsidies and rebates, and if you have a good sales company and compelling material, you can still make some pre-sales. But the challenge is finding the equity.”

John Sloss, founder of the talent management, content sales and strategic advisory company Cinetic Media, also spoke about equity at the American Pavilion. He says that age-old motivations—e.g., to be connected to the glamor of the film business—are still in play, but there’s a disconnect between the needs of equity investors and the current state of the theatrical marketplace. “The traditional equity model is being challenged,” he says. “So, when those distributors come back, and it’s not just flipping to the streamers for buy-out, then I believe there will be more equity than ever. Right now, that is a tough model.” We’ll soon see whether the upswing in theatrical-driven deals at Cannes presages a better environment for equity investors.

The continual, age-old need for name actors to lock in independent film equity financing was cited again and again across various panels, with Bekerman sighing, “What a novel idea.” Helderman adds that the level of cast needed to unlock pre-sales is higher than ever. Indeed, risk-aversion marks the post-pandemic era, and name talent is associated with financial safety, particularly for dramas or any other type of film that is not deemed genre or feel-good. And with the huge boom in streamer-backed production, securing key below-the-line crew is almost as tough as securing talent, says Jillian Apfelbaum, executive vice president of content at Village Roadshow Pictures. She comments that aligning talent, crew and financing availability can be very difficult. Apfelbaum points out that investors will be more apt to give a producer cash once there is already a financial backbone for the project—again, nothing new, but it seems doubly important at the moment.

Also speaking at Winston Baker’s Film Finance Forum in Cannes, Participant Media’s executive vice president of content and platform strategy, Liesl Copland, suggested producers track which territories may have increased funding opportunities, whether due to new incentives or because a streamer has recently launched in a territory and hasn’t yet allocated a budget for local production. She gave the example of Costa Brava, Lebanon from Lebanese filmmaker Mounia Akl, which premiered in Venice last year and was sold by Participant to Netflix for the Middle East. She also observed a rise in production entity federations, whereby companies based in different countries aid each other in centralizing resources, providing intel and banding together with cross-border producers to scale and collaborate at different stages. Others spoke of co-producers banding together across territories to mitigate risk with soft money and subsidies before seeking equity support. Cinetic’s international sales and worldwide distribution strategist Jason Ishikawa stated that global collaborations help get projects off the ground that are not necessarily cast-driven or from well-known filmmakers. 

Deal-Making: Anything Goes

From traditional models, including foreign pre-sales and selling territory by territory, to worldwide rights and more hybrid models, where studios might take multiple territories and sales agents, then sell everything else, it’s safe to say deal-making is all over the map, too. 

Cohen Media Group, which announced its acquisition of My Neighbor Adolf for North America during Cannes, often goes the more traditional route, securing pre-sales in the early production stages (if it’s a level it is comfortable with). Aaronson adds that some sales agents ask to hold off on the domestic pre-sale as the upside, making, in some cases, the pre-sale process more difficult. Cohen, he says, is not competing with the Netflixes of the world, which are taking big swings for material that appeals to the masses. They are instead focused on niche content targeted toward committed moviegoers, betting that arthouse audiences will start regularly going to the theater again and haven’t been permanently conditioned to simply sit at home watching streaming platforms.

Kino Lorber, too, is returning to theatrical, but Lidell says each film needs to be treated differently: “Like other distributors in response to the breaking of the 90-day window, we are experimenting with all of our windows to find the sweet spot for each different kind of film.” A holdover of pandemic experimentation, the distributor’s virtual platform, Kino Marquee, is still up and running.

Regarding in-person screenings, Kampe of Visit Films says he can more easily carve out theatrical and festival rights for some titles, and that he’s also seeing a push by distributors for real theatrical windows—as opposed to day-and-date—again. About windowing, Tiffany Boyle, president of Ramo Law, says that the issue is brought up at the start of every deal-making conversation with the question, “Are we doing theatrical, and what does that window look like?” People are trying to be more flexible and more cognizant of this from the top, rather than it being sprung on them too late, explains Boyle. 

Clay Epstein of Film Mode Entertainment—which is currently selling Mayim Bialik’s dramedy As They Made Us, starring Dustin Hoffman and Candice Bergen, and K. Asher Levin’s thriller Dig, with Thomas Jane and Emile Hirsch—says his company is seeing more multiterritory deals. Owing to the high costs and subsequent risks in releasing a film theatrically, a distributor’s business model may focus on risk mitigation, which usually means a TV or streaming deal locked up before big money is spent on P&A, or maybe buying more than one territory. More often than not, he is finding most of the independent distributors are playing in the VOD/TV space, which is, once again, heavily dependent on cast-driven, commercial films.

But when I think of VOD cast-driven releases, I tend to think of worldwide deals. How prevalent are those deals still? BondIt Media’s Helderman says he is seeing plenty of worldwide rights deals from streamers, studios and direct to consumer/home entertainment buyers like Saban, Vertical and Quiver. In contrast, Village Roadshow’s Apfelbaum says she has noticed less of its content getting streaming deals, which inadvertently reflects on the number of worldwide deals. Tuffin agrees, saying he too has not seen a bevy of worldwide deals except Netflix over the past several years, which he attributes to pricing and exclusivity issues with regional first look and output partners. 

If Netflix does take a Village Roadshow film, adds Apfelbaum, it is usually after their film has been completed—which is counter to the experience of other sellers I spoke to, who recommend striking a streamer deal early on. She also says that many (up to 200!) U.S. streaming platforms, particularly emerging ones, are now angling to control all territories: “They want all the territories even if they don’t have a presence or footprint in that territory because the intention is they will in five to 10 years, which is beneficial for a 15-year license fee.” 

The tension between territorial pre-sales and the demands of an all-rights buyer like a streamer—a tension typified by the release of the Oscar-winning CODA—was referenced throughout the festival. CODA was an example where several territories had been pre-sold, deals that had to be painfully renegotiated once Apple bought the film at Sundance and demanded worldwide rights. In previous years, there was a trend where streamers would pay back with a premium to local distributors to take global rights, but in this case, several held on to theatrical, arguing that they supported the film from the beginning and would stick with their releasing plan. Cinetic’s Ishikawa cited a similar example around the company’s sale of I Am Greta: “If distributors want it badly enough, they will fight for their rights.” Still, he says, “We used to unwind territorial licenses to get a global deal all the time. It can be ugly and messy, and we try to avoid it.” 

Protagonist’s head of sales, Janina Vilsmaier, says it too can have challenges in aligning territories with a global release. She uses the example of Elizabeth Banks’s abortion drama Call Jane, picked up by Roadside Attractions for the U.S. after its Sundance premiere. While she says Protagonist was thrilled by Roadside’s screen commitment, it was challenging to tell European partners they had to wait 10 months before they could release: “It’s getting more and more tricky to get things aligned. Everyone has to work together.” 

Content: What’s Hot

Even more than in the past, higher-budgeted packaged genre content like action, thriller and sci-fi are deemed safe sells, which some consider critical for pre-sales. Action is king of international because it speaks to broad demographics. Comedy is also a safe market bet, particularly when there is a proven comedic star attached. Christmas movies are also making their way into bigger production hands, says Boyle, who notes that family content is strong, too. But the “depressing stuff” is harder unless there is a big name or director involved. 

One Australian industry head says she heard sales agents saying in meetings they are looking for “projects that pop.” If it’s arthouse, then it needs authorial depth; if it’s unique, it should also be personal. These sales agents advise not to use the word “drama” unless top talent is attached. Tuffin adds that having a strong, reliable filmmaker on board can add trust and value for buyers and allow for new acting talent that otherwise may not be considered “sellable.” He uses the example of Sentient’s latest action thriller Sombra, which it introduced in Cannes. Along with director Antonio Negret, the producers attached Latin actor Juan Pablo Raba, just off Freelance opposite John Cena and Alison Brie, and Portuguese actress Daniela Melchior, who starred in The Suicide Squad and Fast X. Neither are top-line stars, he explains, yet they ignited the imagination of buyers, who recognize they are buying in on the next generation of Latin and European talent. 

What’s Next

With Venice, Toronto and AFM looming and more films in post, buyers are expecting buzzier, cast-driven projects. Epstein says it’s worth observing changes happening in both the streaming platforms and the traditional television markets, as this too affects the international marketplace. One example of a traditional television disruptor, AVOD (ad-supported video-on-demand), has already proven itself lucrative for distributors and producers, and it seems only a matter of time before Netflix joins the ad-tiered approach. 

Distributors will be continuing to note the streaming platforms’ buying patterns, with Boyle anticipating the confusion about how certain streamers will be proceeding as an opportunity for independent buyers to continue acquiring films that might have gone to streamers a year or two ago. 

Tuffin, meanwhile, expects studios and streamers to shift back toward acquisitions, as forced downsizing and cuts often have a direct relationship with development and production, saying, “With the plethora of streamers needing content to fill their pipeline, this should in time start to favor indie and international producers, but at what price levels we aren’t sure yet.”

By the fall, distributors will have full slates, and it will be interesting to observe how awards contenders and specialty dramas will be released. Recent box-office figures are encouraging, says Lidell, but not up to pre-pandemic levels for these films. Many industry insiders estimate at least another year for recovery. In the meantime, which films can break out amidst the continued inundation of content across mediums?

On the deal-making side, will we see more hybrid approaches? Can buyers take on bigger deals, with worldwide rights and all territories? Will China return as a major player? And will smaller territories bridge together and work more as coalitions? One thing is for sure: after the pandemic’s forced stay-at-home viewing, everyone wants the film business to spring back to theatrical life in some shape or form.